Arec 202 final

the role that prices play in directing resources away from overcrowded markets and towards that are undeserved is known as the _____ function of price:

Rationing

Suppose you want to maximize your total utility. If your marginal utility per dollar spent is higher for one good than for all others, then you should:

Reallocate your spending towards that good

Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ____ and the market price will ____:

Rise; fall

A decrease in supply causes:

Shortage to occur at the original price, which leads to an increase in equilibrium price and a decrease in equilibrium quantity

An increase in demand causes a:

Shortage to occur at the original price, which leads to increases in equilibrium price and equilibrium quantity

The difference between "demand" and "quantity demanded" is that:

"demand" refers to the entire curve while "quantity demanded" refers to a particular price-quantity combination on the curve

The short run is best defined as

A period of time sufficiently short that all factors of production are variable

If 30% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand

2

Which of the following is most likely to be used efficiently?

A privately-owned natural resource

Suppose Chris' marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 2. One can infer that:

Chris' total utility from eating two tacos is 17

The long run is best defined as:

A period of time sufficiently long that at least one factor is fixed

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ____ function of price:

Allocative

Economics is the study of:

Choice in the face of limited resources

Supply is define as:

Quantity of a good of service that producers are willing and able to produce at a given price over a given time period

The allocative function of price is to:

Distribute scarce goods and services to those consumers who value them the most highly

What is NOT a characteristic of a perfectly competitive market

Each firm in the market sells a somewhat different variant of the good

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. As a result of the increase in the price of corn, farmers who were already growing corn will earn an:

Economic loss in the long run

If it is possible to make a change that will help some people without harming others, then the situation is:

Efficient

The price at which the quantity demanded is equal to the quantity supplied is known as ______ price

Equilibrium

Measure the payments made to the firm's factors of production

Explicit Costs

As the price of a good falls:

Fewer firms can cover their opportunity costs of producing the good

One difference between the long run and the short run in a perfectly competitive industry is that:

Firms necessarily earn zero profit in the long run but may earn positive or negative profit in the short run

Total economic surplus will be ____ in nations with well-defined property rights than in nations with poorly-defined property rights

Higher

A price-taker faces a demand that is

Horizontal at the market price

A rational seller will sell another unit of output:

If the cost of making another unit is less than the revenue gained from selling another unit

Ingrid has been waiting for the show "Mama Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends the show and Ingrid does not, then this situation is:

Inefficient because Steven and Ingrid could have made a mutually beneficial trade

If demand is ____ with respect to price, a price increase will ____ total revenue

Inelastic; increase

Both a perfectly competitive firm and a monopolist find that:

It is best to expand production until the benefit and the cost of the last unit being produced are equal

According to the law of diminishing returns when some factors are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

Larger and larger quantities of the variable factors of production

Barriers to entry are forces that

Limit new firms from joining an industry

If the demand for electricity is elastic, then if the local utility wants to increase its total revenue, it should ____ its price

Lower

If the demand for electricity is elastic, then if the local utility wants to increase its total revenue, it should _________ its price

Lower

The primary objective of most private firms is to:

Maximize profit

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

More than 30 additional employee hours

If a firm's production process exhibits increasing returns to scale, then doubling all the firm's inputs will lead output to _____:

More than double

"Market Power" refers to a firm's ability to:

Raise its price without losing all of its sales

A change in quantity supplied is represented by

Moving to a different point of the same curve, a change in the price-quantity combination with no charge in the location of the supply curve, movement along the same supply curve (all of the above are ****ing correct goddammit)

A cost of an activity that falls on people not engaged in the activity is called a:

Negative externality

If a firm functions in an oligopoly, it is:

One of the small number of firms that produce goods that are either close or perfect substitutes

The essential cause of the tragedy of the commons is the factor that:

One person's use of a commonly held resource imposes an external cost on others

A seller's supply curve shows the seller's:

Opportunity cost of producing an additional unit of output at each quantity

If you were to start your own business, your implicit costs would include the:

Opportunity cost of the time you spend working at the business

The tragedy of the commons refers to the:

Overuse of resources that have no price

The profit maximizing rule P=MC applies to:

Perfectly competitive firms only

A benefit of an activity received by people not participating in the activity is called a:

Positive externality

Given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates ____ externality, and burning tires generates ____ externality

Positive; negative

All else being equal, a MORE elastic demand curve will shift more of the incidence on..?

Producers

Suppose Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $.50 per unit and the price of good Y is $1 per unit, then to comply with the rational spending rule, Cathy should:

Purchase less than 20 units of good X and more than 25 units of good Y

If the price of a good goes up:

Quantity demanded goes down

If cross-price elasticity of demand between two goods is positive, the two goods are

Substitutes

What is the effect on the supply of agriculture products of farmers using better fertilizers and pesticides?

Supply rises

An increase in supply causes a:

Surplus to occur at the original price, which leads to a decrease in equilibrium price and increase in equilibrium quantity

Which chain of events is correct? A decrease in demand causes a

Surplus to occur at the original price, which leads to decreases in equilibrium price and equilibrium quantity

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. All else equal, an increase in the price of corn creates an incentive for farmers to:

Switch away from growing soy beans and into growing corn

Economies of scale exist when:

The average cost of production falls as output rises

The price elasticity of demand is a measure of:

The change in quantity demanded of a good that results from a change in its price

Marginal cost is calculated as

The change in total costs divided by the change in output

One reason that variable factors of production tend to show diminishing returns in the short run is that:

The cost of employing additional resources increases as firm's employ more of those resources

When the price of a substitute rises:

The demand for the other good rises

Last year, casey grew veggies, which she sold at her local farmer's market, but this year, Casey did not plant any veggies and went to work at a bank instead. If Casey's decision to change careers did not affect the price of veggies at the farmer's market, then this suggests that:

The demand for veggies did not change

Economic rent is

The difference between the payment made to the owner of a factor of production and the owner's reservation price

If a firm is earning zero economic profit, then:

The firm will shut down in the long run but will continue to operate in the short run

Which of the following best explains why you are most likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people

A surplus exists when:

The quantity demanded is less than the quantity supplied at the current price

Which of the following statements about implicit costs is true?

They are always fixed

Which of the following would be most vulnerable to the tragedy of the commons?

Timber on public land

Accounting profit is equal to:

Total revenue minus explicit costs

Economic profit is equal to:

Total revenue minus the sum of explicit and implicit costs

Individual supply curves generally slope _____ because ____:

Upward; of increasing opportunity

Last summer, real estate prices in your town SOARED. You start noticing more "for sale" signs in your neighbors' yards. You conclude that

When housing prices rose, they start to exceed some of your neighbors' reservation prices

The principle of Increasing Opportunity Costs state that:

When increasing production, resources with the lowest opportunity costs should be used first

If the consumption of a good generates an external benefit, then market equilibrium quantity:

Will be less than the socially optimal quantity

If you have a comparative advantage in a particular task, then:

You give up less to accomplish that task than others do

The profit maximizing rule MR=MC applies to

all firms

If consumers can readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be

elastic

A price setter is a firm that:

has some degree of control over its price

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

less than one

The buyers reservation price of a particular good or service is the:

maximum amount the buyer would be willing to pay for it

If marginal utility is positive, then as consumption increases:

total utility will increase